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Chinese property splurge spurs Chinese luxury development in Australia

07/06/2015| 6:52:31 PM|

Australia’s close proximity to China, the country’s education system, clean air, and political and economic stability all make its real estate an appealing investment.

As a wave of real estate investment from China floods into Australia, Chinese developers are moving to get a piece of the market with massive developments—despite official policies that are getting tougher on foreign buyers.

Last week, gigantic Chinese state-owned conglomerate China Poly (known for its gigantic auction company) announced that it would be pursuing a $154 million apartment complex development in the northwest suburbs of Sydney. While this will be the company’s first standalone project in Australia, it previously paid around $20 million in May for a stake in a Melbourne apartment complex, and has been talking to Gold Coast and Queensland developers. This announcement comes after the launch of several Australia projects by top Chinese developers including Dalian Wanda and Country Garden, as well as major investments by Greenland and Fosun.

One of the biggest projects comes from Dalian Wanda Group, which recently revised its application to redevelop Sydney’s Circular Quay for an estimated $1 billion. It plans to open a 110-meter five-star hotel along with a 185-meter residential tower. Meanwhile, in February 2014, Country Garden paid $65 million for a site in Sydney that is intended to include residential and retail property.

Even with a host of new projects, experts say that Chinese demand is exceeding supply for the country’s available real estate, driving prices sky-high. One Credit Suisse analyst recently told Financial Review that “supply has picked up, but not by enough” to meet demand from the Chinese buyer market.

Surging real estate prices in Australia have caused public sentiment toward Chinese buyers to become increasingly negative. Australian politicians have been criticizing the wave of new construction aimed at Chinese buyers, stating that it’s too focused on luxury rather than housing affordable for locals.

To respond to these attitudes, the Australian government has been making moves to crack down on illegal sales of existing real estate to foreigners. In March 2015, the Australian government forced Chinese billionaire Xu Jiayin to sell a $40 million harborside home in Sydney, which it said had been illegally procured—foreigners are only allowed to buy new properties in Australia. The country’s Foreign Investment Review Board (FIRB) has announced that it’s currently investigating more home sales deemed suspicious that may have violated the law.

The sales are causing growing tension at a time when China represents the top nationality for foreign real estate buyers in Australia. In May 2015, an Australia-based Chinese property developer told Hong Kong media in a report that went viral among Chinese-Australians, “Australia can’t survive without us,” citing Chinese buyers’ propensity to purchase luxury real estate and automobiles. “Therefore, Australian[s] keep the anti-Chinese resentment to themselves.”

Credit Suisse estimates that Chinese buyers spent $8.7 billion on Australian residential property in the 2014 fiscal year, up 60 percent from the previous year. Approved residential real estate projects by Chinese investors reached $12.4 billion in Australia in 2014, an amount more than double 2013’s $5.9 billion, according to the country’s Foreign Investment Review Board (FIRB).

Chinese buyers are drawn to Australian real estate for a number of key reasons. According to statistics from Australia-based Chinese real estate listing company Juwai, Australia is the third most popular location for Chinese real estate buyers after the United States and UK, coming in ahead of Canada, Spain, and New Zealand.

While speculative buying in China’s real estate market is stoking fears of a bubble, international real estate is seen as a safe alternative for buyers as they head abroad to purchase. In addition to Australia’s close proximity to China, the country’s education system, clean air, and political and economic stability all make its real estate an appealing investment.

While the government’s crackdown on illegal purchases of existing homes isn’t likely to affect Chinese demand for new properties, other measures and market conditions may cause Chinese buyers to look elsewhere for property in the future. Sydney and Melbourne authorities are worried that the influx of speculative foreign buyers is creating a housing bubble, which may deter Chinese buyers looking for a secure deal.

Meanwhile, further public sentiment against Chinese buyers may affect future government policies regarding the purchase of new properties or approval of new projects. If the Australian housing market starts to look unappealing, Chinese buyers will likely continue to head to other favorite foreign real estate hotspots such as Los Angeles, Vancouver, and New York in the years to come.

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TAGS: Wanda Group | Austrlia | gold coast | China Poly
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